This article will reflect on the compensation paid to Harry Herington who has served as CEO of NIC Inc. (NASDAQ:EGOV) since 2008. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing NIC Inc.'s CEO Compensation With the industry
According to our data, NIC Inc. has a market capitalization of US$1.8b, and paid its CEO total annual compensation worth US$2.4m over the year to December 2019. That's a modest increase of 3.2% on the prior year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$500k.
In comparison with other companies in the industry with market capitalizations ranging from US$1.0b to US$3.2b, the reported median CEO total compensation was US$6.0m. That is to say, Harry Herington is paid under the industry median. Moreover, Harry Herington also holds US$23m worth of NIC stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
On an industry level, around 14% of total compensation represents salary and 86% is other remuneration. NIC is paying a higher share of its remuneration through a salary in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at NIC Inc.'s Growth Numbers
Over the past three years, NIC Inc. has seen its earnings per share (EPS) grow by 3.2% per year. In the last year, its revenue is up 17%.
We think the revenue growth is good. And, while modest, the EPS growth is noticeable. Although we'll stop short of calling the stock a top performer, we think the company has potential. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has NIC Inc. Been A Good Investment?
Boasting a total shareholder return of 67% over three years, NIC Inc. has done well by shareholders. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
As we touched on above, NIC Inc. is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. In contrast, shareholder returns have been excellent over the past three years, and that’s certainly a promising trend to keep an eye on. As a result of the juicy return to investors, CEO compensation may well be quite reasonable.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 1 warning sign for NIC that investors should think about before committing capital to this stock.
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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